Nobody knows what is going to happen to the $5,000,000 exemption after 2012. It would seem that anybody, with significant net worth, who has not already used it, should seriously consider a 2012 mega gift. A family limited partnership allows the exclusion to be leveraged to cover more asset value.
There are a number of incredibly powerful estate planning tools available for leveraging intergenerational wealth transfers. Naturally, the appropriateness of a given tool hinges on the assets your family controls. For some, one of those tools worthy of serious consideration is the Family Limited Partnership (FLP). However, you must take care to get it right.
As a testament to the power of the FLP and the costs of failing to use them correctly, Peter Reilly at Forbes has assembled the six developments of 2011. I commend them to your reading. When FLPs work, they work. Consider the cases of Natale Giustina and Anne Y. Petter. However, since we so rarely learn our best lessons from our successes, there are four developments to instruct us regarding what not to do: LINTON v. U.S, Axel Adler, Jorgensen v. Comm’r. 107 AFTR 2011,and Paul H. Liljestrand.
The Forbes article gives a “moral of the story” of sorts regarding each case. In the end, the overall moral to the FLP - as we head into 2012 and ever closer to the unknown tax laws of 2013, and an election year no less - is that this may be your last year to fully leverage the wealth transfer power of the FLP.
Making use of the FLP tool requires dedication to the process and setting it up now (rather than later) may guarantee your ability to make use of the current laws.
Regardless, 2012 may be the year for a mega-gift.
Reference: Forbes (December 30, 2011) “6 Family Limited Partnership Developments In 2011”